Alcoa Manages to Set Positive Tone for Earnings Season

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Alcoa Inc. (NYSE: AA) just kicked off the official start of earnings season. This was one of our featured stocks in the most overvalued and undervalued Dow Jones Industrial Average stocks for 2013. The aluminum giant reported earnings as $0.21 per share from continuing operations, but the number was recorded as $0.06 per share outside of positive items. Revenue rose by 1% sequentially but fell by 2% from the fourth quarter of 2011 with sales coming in at $5.9 billion. The Thomson Reuters consensus estimates were $0.06 EPS on a 6.5% drop in revenues to $5.60 billion. WhisperNumber.com had a whisper number of $0.07 EPS but it also said that Alcoa has only a 36% positive surprise history.

Chairman Klaus Kleinfeld just told CNBC that he thinks growth in China will return to above 8% in 2013 and he sees Europe as muddling through, which is at least better than many were expecting in the fourth quarter.

In 2013, Alcoa sees global aluminum demand growth of 7 percent, up from 6 percent in 2012 and ahead of the 6.5 percent rate required to meet the Company’s forecast of a doubling in global aluminum demand between 2010 and 2020. Aluminum demand grew 10 percent in 2011 on top of 13 percent growth in 2010.

Alcoa said that it delivered $1.3 billion in productivity and overhead improvements, reduced days working capital by three days, and ended the year in a strong liquidity position with net debt at its lowest level since 2006 and $1.9 billion cash on hand.
Here are the company’s individual growth targets for 2013 for global growth by sector:

  • aerospace (9-10 percent),
  • automotive (1-4 percent),
  • commercial transportation (2-7 percent),
  • packaging (2-3 percent),
  • building and construction (4-5 percent),
  • and industrial gas turbine (3-5 percent) markets.

Alcoa shares closed down 1-cent at $9.09 and the 52-week trading range is $7.97 to $10.92. The consensus price target today was $10.16, but that is likely to change in the days ahead as analysts make their price target and ratings changes for 2013. Shares are trading up 2,2% at $9.29 in the after-hours session. We projected that options traders were braced for a move of up to $0.34 to $0.39 in either direction, although the very low VIX may have been impacting that.

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